Skybus' planned Tuesday start shows promise

As Skybus Airlines taxis toward its inaugural flight on Tuesday, it enters a stormy industry that has grounded many discount airlines before it.

As Skybus Airlines taxis toward its inaugural flight on Tuesday, it enters a stormy industry that has grounded many discount airlines before it.

But experts say Skybus, founded with the help of Columbus businessmen, is the best-funded startup since deregulation, launching with $160 million that includes backing from the likes of Morgan Stanley and Fidelity.

Investors have been swayed by business models similar to those of Southwest Airlines and Ryanair, which has been wildly successful in Europe.

Skybus will offer U.S. travelers some new twists.

Every flight will offer at least 10 tickets for $10 each, a low-cost strategy that also includes charging for everything from checked bags to soft drinks.

You want a ticket? You can only book online at the Skybus Web site, www.skybus.com.

You want to go to a few places off the beaten path? Skybus flies to Portsmouth, N.H., more than an hour's drive north of Boston and right next to the Maine coast. Or try Bellingham, Wash., between Seattle and Vancouver, British Columbia.

The strategy seems to be working so far, as more than 200,000 tickets have been sold since they went on sale at 6 a.m. on April 24.

"I purchased six tickets to L.A. before 8 a.m.," said Cynthia Rickman, a public-information officer for the city of Columbus. "I got on and started booking three tickets for myself, my husband and my stepdaughter. Then I called my sister in Pittsburgh."

Today's quick pace is quite a contrast to the long, slow road that has been traveled to get Skybus off the ground.

"There are about a thousand moving parts to starting up an airline," CEO Bill Diffenderffer said recently. "If I'd known how many, I probably would've run screaming when they asked me if I wanted to run a start-up airline."

Dayton-area businessman John Weikle had the original vision.

He had tried to start a regional business carrier called Heartland Airlines out of Dayton in the late 1990s, but it failed. By 2002, he had a new plan for a very low-cost airline that could compete against Southwest, whose costs and prices were creeping up.

Basing it in Columbus seemed an obvious choice after America West announced in early 2003 that it would close its hub at Port Columbus.

Within days of the America West announcement, Weikle made a pitch to Port Columbus officials. An outside consultant hired by the airport told them that Skybus would work.

Weikle discovered that it helps to be connected in Columbus when seeking financial support. After receiving a tepid response, he was close to taking his plan to Indianapolis or back to Dayton.

But Port Columbus officials were able to link Weikle with both Mayor Michael B. Coleman and Thomas Hoaglin, chief executive at Huntington Bank. With them on his side, Weikle was off and running.

Local investors came on board. The largest included Nationwide Mutual Capital, Huntington Capital Investment Co., Battelle Services Co. and Wolfe Enterprises Inc., a subsidiary of The Dispatch Printing Company, which publishes The Dispatch.

Ryan Helon, managing director of Nationwide Mutual Capital, said his company's multimillion-dollar investment was based on both a commitment to Columbus and confidence in the Skybus plan.

"We saw clearly that there was a market need in Columbus," Helon said. "We thought … Columbus could draw those people from a large area including Akron, Cincinnati and Cleveland."

By late 2004, Weikle said, it had become apparent that Skybus needed someone with "name value" and chief-executive experience to lead the company to the next level. The venture already had attracted a handful of experienced talent, including Ken Gile, a pilot and 25-year veteran of Southwest Airlines who is now president of Skybus and its third-largest individual investor.

An executive search yielded several names, including those of Bill Diffenderffer and Charlie Clifton.

Clifton, who had spent 16 years at Ryanair, became vice chairman. He brought the "DNA of Ryanair," as he and Diffenderffer say. Diffenderffer, a former Eastern Airlines attorney and CEO of two travel-systems firms, joined Skybus as chief executive. The two proved a strong fundraising team, Weikle said: Clifton's familiarity with the Ryanair model and Irish charm, combined with Diffenderffer's leadership experience and technology background.

"Investors like that Skybus has done what they said they would do: create an extremely efficient operating model and a great value position for travelers," said Josh Connor, a managing director at Morgan Stanley.

Diffenderffer acknowledges that the original Skybus business plan changed a lot. The airline decided to buy rather than lease aircraft. That led to Skybus ordering 65 Airbus A319 jets, one of the largest orders the European aviation company has ever received from a new airline. Skybus will lease aircraft until the new planes begin arriving late next year.

The original route structure also changed, gaining a stronger West Coast focus: Skybus is flying to Los Angeles, San Francisco and Seattle, bypassing such markets as Milwaukee and Chicago, which were part of the original plan.

More routes are to be announced in a week or two. Long-haul flights to places such as Florida and California are likely.

Diffenderffer insists that all current routes are showing respectable bookings, though flights to Richmond, Va., and Kansas City are less popular than others.

"Unless they were doing pitifully slow, we wouldn't think about investing in a route for just a couple of months and then pulling out," Diffenderffer said. He and Clifton point to the saying that Ryanair proved: People will fly "from nowhere to nowhere" for the right price.

Late last year, Skybus was granted an incentive package valued at $57 million by the city, county and state based on its expected economic impact and job creation for Columbus. The airline has nearly 200 people on the payroll and expects to be close to 900 by 2009.

"We're very incentive-oriented," Diffenderffer said. "Our employees will get stock options, and many of the flight attendants are young and right out of college. There's an opportunity here: Ken (Gile) did great at Southwest with his stock options, and Charlie (Clifton) did well at Ryanair."

"Call-center customer service is getting worse and worse anyway," he said. "And if you offered phone service instead of doing things over the Internet, you'd be raising the fares by 20 percent."

For as little as $10 each way, including taxes and fees, travelers appear willing to give Skybus a try.

Kathleen Ransier, chairwoman of the Columbus Regional Airport Authority, said it's been fun watching the reaction in the law office where she is an attorney.

"The day tickets went on sale, people were talking about being able to fly on a nonstop flight for the first time to visit their parents," she said. "They were saying they were able to go see their children who are away at school. People are going to Disneyland. It's just generated so much excitement."

mrose@dispatch.com

In Business • Skybus takes cues from Europe's hottest discount carrier • Startup airlines often fail • Port Columbus' fares already the cheapest in the state See Page D1